Steel terminal diversifies cargo flow

  • 2001-06-21
  • Aleksei Gunter
TALLINN - Construction of a new steel terminal kicked off on June 12 in the port of Muuga near Tallinn. The $205 million project, slated to be completed in 2002, is so far the largest international industrial investment in Estonia.

Supervised by Galvex Estonia OU, which is owned Galvex Holdings Ltd., the steel terminal facility will provide 150 permanent jobs. Galvex Estonia OU was known until last year as Ruma Estonia OU.

"The project is known to the international banks as "Galvex" so it made sense to change the name of the Estonian project company to Galvex as well," said Daniel Bain, a board member and a spokesman for Galvex Estonia OU.

International Steel Industries owns 90 percent of Galvex Holdings Ltd. and Centre Re, a division of Zurich Financial Services Group, owns the remaining 10 percent.

"The reason we chose to build the facility at a port site was that it gives us flexibility to buy and sell in all world markets. That means that we will be bringing steel in by both rail and by vessel. Also, steel will go out by both rail and vessel," he said.

Some other companies operating in the Port of Muuga have expressed frustration with the project.

Vladimir Volohonski, president of DBT Ltd., a company dealing with fertilizers, told the Aripaev daily that if the Galvex project doesn't succeed, it will simply waste space that otherwise could be useful for other companies.

Galvex Estonia OU expects to receive a significant amount of steel from producers in Russia, Ukraine, Kazakhstan, and Eastern Europe.

In the near term, the steel will come in by rail and leave by vessel, said Bain.

As the terminal can galvanize steel, it will diversify the cargo flow passing through Estonia.

"Oil transit, which is the dominating branch of transit here, in Estonia is seriously threatened by new ports in Russia and also by the Primorsk pipeline which is currently under construction," said Bain.

The terminal is not directly competing with Russian ports, as they do not have the necessary equipment to galvanize steel.

"Even if Russia closes its border with Estonia, the Galvex Estonia facility will continue to operate at full capacity and will import all its goods by vessel from the world market," said Bain.

Galvex is trying to implement the U.S. experience in Estonia with it's independent galvanizing line which is not tied to a particular supplier.

It will be the first place in Estonia to galvanize sheet steel. Products that are made from galvanized steel include construction materials, automotive parts, and appliances. According to Bain, such facilities are very common and successful in the United States.

"Independent galvanizers are able to compete with integrated steel mills because they have the flexibility to buy cold-rolled steel at competitive prices without the significant overhead of an integrated steel producer," he added.

The galvanizing facility itself will be 36,000 square meters. The steel storage terminal, a separate building, will be the first metal warehouse in the Baltics to offer a climate control system.

In the first year of operation, the company predicts the facility will handle more than 500,000 tons.

"We will steadily increase throughout and have guaranteed a minimum cargo flow of more than 1.5 million tons per year. We estimate that cargo flow will increase to approximately 3 million tons per year," said Bain.

Danieli Engineering, an Italian company, will construct the buildings and, after a tender, an Estonian company will assemble them on the spot.

"The foreign specialists we have brought to Estonia are here temporarily while we train locals. Our intention is to have the plant fully staffed by locals," said Bain.

Galvex Estonia OU believes the whole Baltic region will benefit from the project. "We have already begun discussions with manufacturers in Europe and the United States who have showed interest in fabricating steel products in the Baltic region," Bain told The Baltic Times.